Disappointed in Lenovo Warranty Services - where should I go from here?

Long time lurker, occasional poster here - I'll just say I'm glad such a community exists where both users and staff are so helpful!

Around February 2008, I bought an X61t online. Because my previous laptop completely died suddenly in its third year, I decided to get the lengthiest warranty available to me (which was pretty expensive) so as not to repeat that experience. About a month ago, my laptop started shutting down by itself, so I decided to bring it in for repair.

A few days ago, I got a response that it would cost $950 to replace the motherboard and hard drive cover because of "physical damage" which apparently is not covered by the limited warranty. First, the policy itself does not mention anything about physical damage (though it does have something about not covering accidental damage, which is the closest thing I could find). I got through to ther service center representative and asked for a breakdown of the costs anyway, but they were unable to give me a further answer. After a few days, they were able to phone me and tell me that specifically, the NIC port was damaged.

Besides the fact that I've used the port recently with absolutely no problem, how could they justify that as "physical damage?" Furthermore, this has nothing to do with the power issue I was having before (though they did mention that my laptop would need to be brought back to "warranty status"). It seems to me that anything plastic or hardware related would be "physical damage" and it's starting to seem like the extended warranty I bought was a scam.

I'm at a loss as to my options here. I can hardly afford to buy a new laptop now, and if that one becomes unusable I'm pretty much screwed.

I don't know if anyone else has had a similar experience, but I hope somebody can give me some advice about this.